If you own your own business, you will likely need to consider selling it at some point. You will retire at some point, and you could need to sell before then because of financial hardship, illness or another reason. Even if you are just selling the business to an employee or a relative, you need to know what it is worth so you can be fairly compensated. To get an accurate business valuation, you may need to avail yourself of business valuation services.
What your business is truly worth may be more or less than what you believe it to be. If you have an inflated opinion of your business valuation, you may set the price way too high and not be able to sell it. If you think your business is worth less than what it really is, then you could wind up leaving money on the table. Neither of these situations is ideal, and they can be avoided by using the expertise of business evaluation services to get small business valuations.
When looking to value your business, a valuation professional is likely to take one of three approaches. He or she might use comparable sales of other businesses, take the value of the assets or look at the potential for future sales and weigh it against the risks. In some situations, your valuation professional may use a combination of two or more of the factors to come up with a price. What type of business you have can influence what method to use as well. For example, for an online service business, it would make much more sense to use a valuation income approach to look at prospects for sales. On the other hand, a manufacturing business with lots of expensive machinery may be better off being valued based on its assets.
At a minimum, you can expect to need to show your valuation expert about three to five years worth of balance sheets and income statements. You might also be asked for client lists, an inventory of intellectual property and other documentation that might show the worth of intangible assets.
Keep in mind that selling your business is more of an art than it is a science. Even if you have a firm grasp on assets and sales, it still comes down to whether you can find an interested buyer, and you may have to decide whether you want to get your business sold for less than you expected or hold out for a certain price while facing the risk of not selling your business at all. For more information see this.